Is Groupon a Deal?

GrouponBOSTON – Groupon (NASDAQ:GRPN), the once beleaguered deal-of-the-day website has staged a bit of c comeback in recent months.  Investors have welcomed the promotion of Eric Lefkofsky from interim co-CEO to CEO, which followed the removal of the company’s founder as recent results have been encouraging.  While the company’s net loss was within expectations, revenues of $ 609 million exceed expectations of $ 600 million; a 7 percent increase over the previous year.  In addition, forward bookings were especially encouraging at $ 1.4 billion.  The combination of management stability, sales growth, and the announcement of a $ 300 million share repurchase program (which will be conducted over the next two years) helped shares to surge almost 20 percent in after-hours trading on Thursday and is currently trading near its 52-week high.

Mr. Lefkofsky, who was an original investor in Groupon, took over co-leadership of the company after CEO and Founder Andrew Mason was removed amidst earnings misses and accounting scandals.  In comments made on Thursday, Mr. Lefkofsky stated that ‘Groupon has both grown and evolved, and the board felt strongly that continuity was important.  We simply have too much to do in building out our business model to take on a transition at this point.’

However, second quarter details were uneven as the company has been unable to reverse a slowdown in its international business and revenues for the core daily-deals business contracted $ 84 million in the second quarter from $ 503 million in 2012 to $ 419 this year.  The lost revenue in daily-deals was balanced by growth in Groupon Goods, the sale of discounted consumer products such as television sets, which rose by 68 percent – though its margins are much lower than daily-deals due to the cost of distribution and shipping. According to the company’s Chief Financial Officer, ‘it takes a few years to build out the infrastructure on that,” he said, “You see the revenue growth, but the profit growth will trail.’

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About the author

Audrey is a senior editor for the business and finance sections.